India is suffering from the menace of Transfer pricing. What is “Transfer Pricing”?

[A] It is a method of tax-dodging by illicit capital flows outside the country.

[B] It is a factor responsible for continuous price rise of food items in India.

[C] It is a new phenomenon that emerged responsible for bad loans of Indian banks.

[D] It is a global phenomenon responsible for devaluation of Indian currency in comparison to reserve currencies.

Answer: [A] It is a method of tax-dodging by illicit capital flows outside the country.

Commercial transactions between the different parts of the multinational groups may not be subject to the same market forces shaping relations between the two independent firms. One party transfers to another goods or services, for a price. That price is known as “transfer price”. It is mainly done for tax-dodging in a country.